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A São Paulo court has ordered the freezing of R$ 47 million in Eucatex shares belonging to Eucatex executive Flávio Maluf and kept on deposit at a bank in Switzerland.

Maluf is the son of the notorious Paulo Maluf. Eucatex is a public company with shares circulating on the Bovespa for many years now. It farms and sells eucalyptus trees.

The order was issued by judge Celina Toyoshima, at the request of state prosecutor Silvio Marques, who is looking into misappropriation of public funds when Paulo Maluf was mayor of São Paulo, from 1993 to 1996.

The prosecutor suspects that the money misappropriated from pubic works were used to purchase the shares.

One of many iconic Maluf moments was when he ordered substantial improvements to roadways connecting his business and home to City Hall. For his own convenience.

If she can prove her case, the city administration can file suit to have its money back.

Since 2001, Eucatex shares increased in value by 250% — which means the market value of the shares in Switzerland is R$ 164.5 million..

Brazilian authorities only learned of the existence of these shares in offshore havens because Flávio was trying to transfer them from Finter Bank, in Switzerland, to a Uruguayan corporation, Cuznar S/A.

As Finter is a small bank, it consulted with UBS, in Zurich ,on the transaction. UBS found the deal suspicious because Flávio is a “politically exposed person,” and questioned Itaú Unibanco, global custodian of Eucatex shares in Brazil.

Itau saw what it believed to be indications of money laundering and communicated its doubts to COAF, the money laundering authority. Coaf advised the prosecutor, who was successful in having the funds frozen. .

The custodian is the institution responsible for the storage of shares. In a hypothetical example, shares with shares under custody in São Paulo can be used a gurantee to obtain a loan from a Swiss bank.

Maluf is accused by prosecutors of diverting US$ 344 million from the city coffers duringthe construction of Roberto Marinho Avenue and the Ayrton Senna tunnel.